Investing in India

Investing in India
Practical Law Country Q&A 7-596-0585
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Investing in India, Practical Law Country Q&A 7-596-0585
Investing in India
by Shardul S Shroff, Rudra Kumar Pandey and Vishal Nijhawan, Shardul Amarchand
Mangaldas & Co (First Law International Member Firm)
Country Q&A | Law stated as at 01-Jul-2020 | India
A Q&A guide to investing in India.
This Q&A gives an overview of the key factors affecting inward investment, including information on the
jurisdiction's legal system; key laws and regulatory authorities; investment restrictions; and details of international
treaties, customs and monetary unions. The guide also provides information on investor individuals; visa permits;
restrictions on foreign ownership; transfer pricing and thin capitalisation rules; imports and import duties; safety
regulations and standards for commercial goods and services; structuring and tax incentives; investment guarantees;
recent developments and proposals for reform.
To compare answers across multiple jurisdictions, visit the Investing in... Country Q&A tool.
This Q&A is part of the Investing in…Global Guide. For a full list of contents, please visit global.practicallaw.com/
investingin-guide.
The market
Legal system
Investor individuals
Investment restrictions
Imports
Structuring and tax
Incentives
Investment guarantees
Recent developments and proposals for reform
Contributor profiles
Shardul S Shroff, Executive Chairman
Rudra Kumar Pandey, Partner
Vishal Nijhawan, Senior Associate
The market
© 2020 Thomson Reuters. All rights reserved. 1

1. How does your jurisdiction compare internationally as a destination for

inward investment?
India is one of the top global destinations for foreign investment. The International
Monetary Fund (IMF) has acknowledged that the Indian economy continues to be one
of the fastest-growing economies in the world, despite the global economic slowdown.
According to the IMF's World Economic Outlook Report in January 2020, India's growth
is estimated to improve to 5.8% in 2020 (as compared to 4.8% in 2019) and is further
expected to improve to 6.5% in 2021.
There are various factors that have made India an attractive destination for foreign
investment, such as the market size, rapid market growth, investment incentives, low
labour cost, low raw material cost, physical infrastructure, privatisation policy, trade
policy, technology and transport cost and so on. The "Ease of Doing Business" initiatives
by the Government of India (GoI) have also been instrumental in smoothing the pathways
for obtaining the required regulatory approvals and thereby facilitating the attraction of
foreign investors to India.
There has been a steady inflow of foreign investment into India in the past few years.
According to statistics published by the Department for Promotion of Industry and
Internal Trade, Ministry of Commerce and Industry (DPIIT), foreign direct investment
(FDI) worth USD284 billion was received between the financial years of 2014/15 to
2018/19. Furthermore, the total FDI inflow into India for the 2018/19 financial year was
about USD62 billion (against USD60.97 billion for the 2017/18 financial year), which is
the highest ever FDI inflow into India. Statistics published by the DPIIT also show a total
FDI inflow of USD21.31 billion in the first quarter of the 2019/20 financial year (against
USD16.86 billion for the first quarter of the 2018/19 financial year).
2. What types of companies are attracting foreign investment into your

jurisdiction and what are the most active sectors?
India receives substantial foreign investment in various sectors and companies.

Highlights of the key sectors are provided below.
Services sector

The services sector (which includes financial, banking, insurance, non-financial or

business, outsourcing, research and development and so on) is presently the most
attractive space for foreign investment, comprising about 18% of the total foreign
investment inflow for the period from April 2000 to December 2019.
FDI in this sector worth USD6.5 billion was received from April 2019 to December 2019
and FDI worth USD80.67 billion was received from April 2000 to December 2019.
E-commerce sector
The e-commerce sector has emerged as an exciting sector for foreign investors and is
projected to be worth about USD200 billion by 2026. The Indian e-retail market is
projected to keep growing strongly, registering a compound annual growth rate (CAGR)
of over 35% and reaching an estimated USD25.75 billion by the 2019/20 financial year.
Foreign investment of up to 100% is permitted in business-to-business (B2B) e-commerce

activities and the marketplace model of e-commerce. In this sector, India has received
majority foreign investment in the marketplace model of e-commerce. The GoI is also
looking to introduce a comprehensive e-commerce policy to better govern e-commerce.
In February 2019, the DPIIT issued the draft National E-commerce Policy (E-commerce
Policy), seeking comments from the stakeholders.
The DPIIT has now finalised the draft E-commerce Policy is expected to issue it soon.
Infrastructure sector
The infrastructure sector is also one of the most attractive sectors for foreign investment.
This includes dams, bridges, power, roads and urban infrastructure development. FDI
worth USD326 million was received in the construction development sector (which
includes townships, housing, built-up infrastructure and construction development
projects) from April 2019 to December 2019 and a total FDI of USD25.37 billion was
received in this sector from April 2000 to December 2019.
India requires an investment of about INR50 trillion (USD777.73 billion) in the

infrastructure sector by 2022 to have sustainable development in the country.
Automobile sector
The automobile sector is yet another sector which offers investment opportunities to
foreign investors. India became the fourth-largest automobile market in 2018. India
received FDI worth USD2.5 billion in the automobile sector from April 2019 to December
2019 and total FDI worth USD23.89 billion from April 2000 to December 2019.
It is expected that India will become a leader in shared mobility by 2030 and provide
opportunities for electric and autonomous vehicles. This sector is expected to grow at
a CAGR of 3.05% between 2016 and 2026 and is expected to reach a value of between
USD251.4 billion and USD282.8 billion by 2026.

Furthermore, many foreign investors have either already commenced their operations or
have announced their plans to manufacture electric vehicles in India.
The GoI is also supporting the growth of this sector and has taken various initiatives in
this regard, such as:
• Tax reductions on electric vehicles.

• Implementation of a Scheme for Faster Adoption and Manufacturing of Electric
Vehicles in India Phase II (FAME II) with effect from 1 April 2019 for a period of
three years. FAME II has made an allocation of INR100 billion to be disbursed in
the next three financial years.
• Shortlisting 11 cities for introducing electric vehicles to their public transport
system.
• Plans to set up incubation centres for start-ups working in the automobile sector.
Renewable energy
Renewable energy is also one of the most attractive sectors for foreign investment. Foreign
investment worth USD9.10 billion has been received in the non-conventional energy
sector between April 2000 and December 2019. It is expected that investments worth
USD500 billion will be received in this sector by 2028.
Other sectors
Other sectors, such as computer software and hardware, telecommunications,
construction development, trading, drugs and pharmaceuticals and chemicals (other than
fertilisers) also saw substantial foreign investment from April 2000 to December 2019.
3. What will be the main factors affecting the market and how do you expect
the market to develop?
Various factors are expected to affect the Indian market. Specifically, the 2019 novel
coronavirus disease (COVID-19) pandemic has impacted business adversely both in India
and across the globe. COVID-19 has led to the shutting down of many businesses, loss of
revenue, loss of employment and so on.
However, the GoI and various state governments have taken steps to minimise the impact
of COVID-19 on the Indian economy, such as:

• Providing a six-month moratorium on all term loans outstanding on 1 March 2020

and on working capital facilities.
• Providing relaxed implementation of the various compliance requirements for
companies under various laws.
• Providing time limit extensions under various tax laws.
It is expected that these steps will provide some relief to companies and others impacted
by the pandemic.
Furthermore, according to forecasts from the IMF, while the global economy is expected
to see the worst financial crisis on record, India is one of the few countries expected to
show a positive growth rate (the highest growth rate among the G20 economies).
The GoI has sought to address the issues faced by foreign investors in India relating
to starting a new business, obtaining the requisite licences, approvals and permits, the
permissible limits of foreign investment and the relevant conditions attached (among
other things).
World Bank Doing Business ranking

One of the main factors expected to affect foreign investment in India is the World Bank's
Doing Business ranking. In its Doing Business Report 2020, India ranked 63 out of 190
economies, which is an improvement of 14 ranks over its performance last year (where
India ranked 77). In this report, the World Bank highlighted improvements made by India
in various areas over the past year. Key improvements include:
• Making it easier to start a business, by abolishing the filing fee for the company
incorporation form, electronic memorandum of association and articles of
association (articles).
• Improved infrastructure permitting for key Indian cities. For example, Delhi has
streamlined the process, reduced the time and cost of obtaining construction
permits, and improved quality control for buildings by strengthening professional
certification requirements. Mumbai has streamlined the process of obtaining a
building permit and made it faster and less expensive to get a construction permit.
• Making it easier to trade across borders, by enabling post-clearance audits,
integrating trade stakeholders in a single electronic platform, upgrading port
infrastructures, and enhancing the electronic submission of documents.
• Helping to resolve insolvencies by promoting reorganisation proceedings in
practice.
Implementation of the Insolvency and Bankruptcy Code 2016

(Insolvency Code)

The Insolvency Code provides an effective legal framework for timely resolution
of insolvency and bankruptcy matters, with several foreign acquirers and bidders
participating in the insolvency resolution process. The GoI is also considering amending
the Insolvency Code to address the issue of cross-border insolvency. Such amendments
are expected to increase the predictability and certainty of the insolvency process, which
will be useful for foreign investors.
Recently, the Union Cabinet approved a proposal from the Ministry of Corporate Affairs
(MCA) to give relief to companies from insolvency for a period of six months from 25
March 2020 by amending the Insolvency Code. Such period may be further extended
by another six months. During such time period, the creditors or lenders will not be
permitted to file a fresh case for insolvency. This decision has been taken to ensure that
fresh insolvency cases are not filed by creditors or lenders against companies which are
already facing hardship due to COVID-19.
Liberalisation of FDI Policy

The liberalisation of India's FDI policy includes the following recent initiatives.
• Relaxation of local sourcing requirements for single brand retail

trading. The local sourcing requirements for single brand retail trading (SBRT)
were recently relaxed under the Consolidated FDI Policy 2017 (FDI Policy). For
proposals involving foreign investment beyond 51%, sourcing of 30% of the value of
goods procured, should be done from India. In terms of the relaxations:
• all procurements made from India by the SBRT entity for that single brand can
be counted towards local sourcing, irrespective of whether the goods procured
are sold in India or exported, this will apply even beyond the initial five years;
• the SBRT entity is now permitted to set-off sourcing of goods from India for
global operations against the mandatory sourcing requirement of 30%;
• the SBRT entity is now permitted to undertake retail trading through e-
commerce prior to the opening of brick and mortar stores, subject to specified
conditions; and
• the SBRT entity is now permitted to undertake sourcing of goods from India
for global operations, either by itself or through its group companies (resident
or non-resident), or indirectly by them through a third party under a legally
tenable agreement.
• Foreign investment in digital media. Foreign investment of up to 26% under

the government route is now permitted for uploading or streaming of news and
current affairs through digital media.
• Foreign investment in contract manufacturing. The FDI Policy permits
100% foreign investment in the manufacturing sector under the automatic
route. It has now been clarified that manufacturing activities can be either self-
manufacturing by the investee entity or contract manufacturing in India through

a legally tenable contract, whether on a principal to principal or principal to agent

basis.
• Single window clearance for foreign investors. A single window system
has been proposed to assist foreign investors in obtaining all necessary regulatory
approvals and clearances in India.
• Relationship manager for foreign investors. A designated relationship
manager has been proposed for foreign investors investing at least USD500 million
in India. The relationship manager will facilitate the foreign investor in obtaining
all relevant approvals and clearances.
• Simplified process for incorporating a company. The MCA recently
simplified the process for incorporating a new company in India. Under the new
incorporation process, an applicant will be able to apply for multiple services
through one application only. Services would include (among other things):
• the incorporation of the new company;
• specified taxation related registrations for the new company;
• specified labour and employment-related registrations for the new company;
and
• opening a bank account for the new company.
This new process is expected to reduce the time and cost of incorporating a new
company and obtaining the necessary registrations.
Legal system
4. What are the constitutional arrangements and legal system.
Government system
The Constitution of India (Constitution) provides for a Parliamentary form of government
which is federal in structure (the Constitution declares India as a "Union of States") with
certain unitary features and specifies the distribution of powers between the GoI and the
Government of the States.
The constitutional head of the executive of the Union of India is the President. The
Constitution provides that there must be a Council of Ministers (headed by the Prime

Minister) to aid and advise the President, who will exercise his or her functions in
accordance with such advice.
The Parliament is the supreme legislative body of India. It comprises of the Rajya Sabha
(Council of States) and the Lok Sabha (House of the People).
Legal system
The Indian judiciary is partly a continuation of the British legal system established by
the British in the mid-19th century, based on a typical hybrid legal system known as the
"common law system". This system comprises of, and relies on, components of law, such
as legislation, customs and precedents in the judicial determination of matters.
The Constitution is the supreme legal document of the country.
The judicial structure is as follows:
• The Supreme Court of India is the highest court of the Indian judicial system.
• This is followed by the High Courts (currently there are 25 High Courts at the state
level) with certain states and union territories sharing a High Court with others.
• This is followed by the district courts which are established by the State
Governments in India for every district, or for more than one district, taking into
account the number of cases, and the population distribution in that district.
• This is followed by Magistrates of Second Class and Civil Judges (Junior Division)
at the bottom.
In addition, village courts, called Lok Adalat (people's court) or Nyaya Panchayat (justice
of the five; a system of local self-governance wherein the members of a village elect five
persons from among themselves to dispense justice) comprise a system of alternative
dispute resolution.
Furthermore, a number of judicial tribunals have been set up in specialised areas,

which function under the supervisory jurisdiction of the High Court (depending on their
location).
5. What are the key laws and regulatory authorities governing foreign
investment in your jurisdiction?
Key laws governing foreign investment

The key laws that govern foreign investment in India are the:

• FDI Policy, issued by the DPIIT.

• Foreign Exchange Management Act 1999 (FEMA) and the rules and regulations
issued thereunder, specifically, the Foreign Exchange Management (Non-debt
Instruments) Rules 2019 (NDI Rules).
The Ministry of Finance (MOF) issued new NDI Rules on 17 October 2019. The new
NDI Rules replace the Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) Regulations 2017 and the Foreign Exchange Management
(Acquisition and Transfer of Immovable Property in India) Regulations 2018 (Immovable
Property Regulations). While the Immovable Property Regulations have been included in
the NDI Rules, they remain unchanged in substance.
The NDI Rules govern investments in India by non-residents investors, non-resident

Indians (NRI) and overseas citizens of India. The NDI rules prescribe (among other
things):
• The conditions attached to foreign investments in India.

• The pricing guidelines for foreign investments, acquisitions and transfers of
immovable property in India, downstream investments, the repatriation of sale
proceeds and so on.
Furthermore, the Reserve Bank of India (RBI) issued the Foreign Exchange Management
(Mode of Payment and Reporting of Non-Debt Instruments) Regulations 2019, which sets
out the mode of payment and attendant conditions for investment in India by a person
resident outside India.
Key regulatory authorities governing foreign investment

The key regulatory authorities governing foreign investment in India are as follows:
• DPIIT. This formulates India's FDI Policy and issues press notes to amend the FDI
Policy.
• RBI. This issues circulars, notifications and regulations under FEMA.
• MOF. This issued the NDI Rules and is now the notifying authority for any changes
to the FDI Policy.
6. Is your jurisdiction a member of any international treaty organisations and/

or economic, customs or monetary unions or free-trade areas?

India is a member of, or has been involved in negotiations with, the following
international treaty organisations and/or economic, customs or monetary unions or free-
trade areas:
• India-World Trade Organization (WTO). India is party to multiple

agreements with WTO member countries, such as the General Agreement on Trade
in Services and the Agreement on Trade Related Aspects of Intellectual Property
Rights.
• ASEAN-India Free Trade Area (AFTA). India signed a free-trade agreement
(FTA) in services and investments with the Association of Southeast Asian Nations
(ASEAN) in November 2014. ASEAN countries comprise Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and
Vietnam. These FTAs are intended to allow for the freer movement of professionals
and to encourage investment. India signed an FTA in goods with the ASEAN in
2009.
• Regional Comprehensive Economic Partnership (RCEP) negotiations
between ASEAN and six partner countries. RCEP is a 16-member grouping
of ten ASEAN countries (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam) and six ASEAN FTA
partners (Australia, China, India, Japan, South Korea and New Zealand) that have
FTAs with it. The 16 RCEP participating countries account for almost one-half of
the world's population. They contribute about 30% of global GDP and more than
25% of world exports.
• India-SAFTA. The South Asian FTA agreement was entered into by the countries
of Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri
Lanka. The SAFTA provides for trade liberalisation on a preferential basis in trade
in goods.
• India-SAARC agreement on Trade in Services (SATIS). India entered into
the SATIS with other South Asian countries namely, Afghanistan, Bangladesh,
Bhutan, Maldives, Nepal, Pakistan and Sri Lanka. The SATIS provides for
liberalising and promoting trade in services.
• India-Mercosur Preferential Trade Agreement (India Mercosur PTA).
This agreement was entered into between Argentina, Brazil, Paraguay and Uruguay
(collectively, states parties to the MERCOSUR) and India.
• Asia Pacific Trade Agreement (APTA). This is a preferential trade agreement
entered into between India, Bangladesh, China, South Korea and Sri Lanka.
• Framework agreement with the Gulf Co-operation Council (GCC) states.
This is a framework agreement for economic co-operation entered into between
India and members of the GCC (consisting of the governments of the United Arab
Emirates, the Kingdom of Bahrain, the Kingdom of Saudi Arabia, the Sultanate of
Oman, the State of Qatar and the State of Kuwait).

In addition, India has FTAs, comprehensive economic co-operation agreements and

comprehensive economic partnership agreements with several countries such as:
• Singapore.
• Malaysia.
• Japan.
• South Korea.
7. What other international agreements apply to foreign investment?
To encourage capital inflow and provide a safe business environment for all investments
abroad, many countries have entered into bilateral investment treaties (BITs) or
agreements with India. These BITs contain reciprocal protections for the purposes of
encouraging, promoting and protecting investments in each other's territories by the
companies based in either country (or state). Recently, India terminated some of its BITs
and is trying to renegotiate them in light of its new Model BIT. In 2016, the first BIT based
on the provisions of the model text was signed between India and Cambodia. The GoI
recently approved the signing and ratification of a BIT between India and Belarus on 27
September 2017.
India also has a vast network of double taxation avoidance agreements (DTAAs) signed
with more than 95 countries. Additionally, India has entered into bilateral investment
protection agreements to promote and protect the interests of investors of either
country in the territory of the other country. To facilitate the effective exchange of
information, India has also been signing tax information exchange agreements with
several countries. In 2017, India also entered into the Organisation for Economic Co-
operation and Development (OECD) Multilateral Convention to Implement Tax Treaty
Related Measures to Prevent Base Erosion and Profit Sharing 2017 (MLI).
India has concluded multiple BITs with various countries. These BITs contain reciprocal
protections for the purposes of encouraging, promoting and protecting investments in
each other's territories by the companies based in either country (or state). In 2016-17,
India terminated several of these BITs, and has been engaged in re-negotiating them in
light of its new Model BIT. Recently, the Department of Economic Affairs (DEA) notified
that BITs with Jordan, Brunei, Myanmar and Mozambique have also been terminated
effective 21 March 2020. (As per the website of the UN Conference on Trade and
Development, it appears that the BIT with Bahrain was also terminated as of 4 December
2017. However, the DEA website still says it is in force).
Among the older BITs, India's BITs with only the following countries remain in force:

• Libya.
• Serbia.
• Sudan.
• Syria.
• Senegal.
• Latvia.
• Bangladesh.
• Lithuania.
Recently, India has signed investment protection treaties with the following countries:
• India-Brazil Investment Corporation Facilitation Treaty (signed January 2020).

• Indian-Kyrgyz Republic BIT (signed 14 June 2019).
• India-Belarus BIT (signed September 2018).
These, however, are not yet in force and in some cases the text of the BIT is not available
on the public domain.
Based on information available in the public domain, we understand that India is

currently negotiating BITs (based on the 2015 Model BIT) with Iran, Switzerland,
Morocco, Kuwait, Ukraine, UAE, San Merino, Hong Kong, Israel, Mauritius and Oman.
Investor individuals
8. Are there any visas, permits or other requirements for foreign individuals
entering your jurisdiction for business purposes?
Visa requirements
Foreign nationals. Under Indian law, the legal rights and the restrictions imposed on
foreign nationals depend on whether they are categorised as residents or non-residents.
Entry into India generally requires a valid visa granted by an Indian Mission (that is,
consulate of the Indian embassy) abroad. Furthermore, foreign nationals who enter India
must register themselves with the Foreign Regional Registration Office (FRRO) within

14 days of arrival if they intend to reside in India for a consecutive period of more than
180 days.
The entry, stay and exit of foreign nationals into India are primarily governed by the
following laws (among others):
• Passport (Entry into India) Act 1920, read with the Passport (Entry into India)
Rules 1950.
• Foreigners Act 1946.
• Registration of Foreigners Act 1939, read with the Registration of Foreigners Rules
1992.
Business visa. Foreign nationals who intend to undertake the following activities
(among others) will need to apply for a business visa:
• Establish an industrial or business venture, or explore the possibilities for

setting up an industrial or business venture, other than proprietorship firms and
partnership firms.
• Purchase or sell industrial products, commercial products or consumer durables.
• Attend technical meetings or discussions, board meetings or general meetings for
the purpose of providing business services support.
• Make a visit of a short duration in connection with an ongoing project with the
objective of monitoring the progress of the work, conducting meetings with Indian
customers and/or to provide technical guidance.
When applying for a business visa, the applicant will need to provide proof of financial
standing and expertise in the field of the intended business. Furthermore, foreign
nationals should not be visiting India for the business of money lending or for running a
petty business or petty trade or for full time employment in India.
A business visa with multiple entry facilities allows a visitor to enter India more than
once during the validity period of the visa. It can be granted for a period of five years for
nationals of most countries. For citizens of the US, Canada, Japan, UK or South Africa, a
business visa may be granted for a period of ten years.
E-visa. The GoI permits foreign nationals visiting India from 169 countries to apply for
an e-visa specified in this regard. An e-visa for business purposes (that is, for all activities
permitted under normal business visa) is valid for a period up to one year with multiple
entries.
Overseas Citizen of India (OCI) cardholder. Indian law recognises a distinct

category of persons called "OCI cardholders". A foreign national is eligible to register as
an OCI cardholder if any of the following factors apply to such person:

• He or she was a citizen of India on or at any time after 26 January 1950.

• He or she was eligible to become a citizen of India on 26 January 1950.
• He or she belonged to a territory that became part of India after 15 August 1947.
• He or she is a child, grandchild or a great-grandchild of any such citizen referred to
above.
• He or she is a minor child of any of the persons referred to above.
• He or she is a minor child, either or both of whose parents are citizens of India.
• He or she is a spouse of foreign origin of a citizen of India or spouse of foreign
origin of an OCI cardholder (subject to specified conditions).
Under the NDI Rules, an OCI is permitted to invest in India. If the OCI cardholder intends
to visit India in relation to his or her business activities, the OCI cardholder may apply
for a visa. An OCI cardholder is entitled to a multiple entry, multi-purpose lifelong visa
to visit India.
Project visa. This visa is granted to foreign nationals coming to India for execution of
projects in the power and steel sectors, subject to certain specified conditions. This visa
is granted initially for a period of one year or for the actual duration of the project or
contract (whichever is shorter), with multiple-entry facility. Project visas are issued only
to skilled or highly skilled persons. A foreign national who has been granted a project visa
will not be allowed to be engaged in another project whether with the same company or
a different company.
Permanent Account Number (PAN) for foreign residents

Any person (whether resident in India or abroad), who is taxable in India, must obtain
a PAN from the Indian income tax authority. Furthermore, all directors, chief executive
officers, principal officers, partners and so on of any Indian tax resident (that is, any
Indian company, partnership, trust and so on), including any person competent to act on
behalf of such Indian tax resident must obtain a PAN. A PAN is also required for opening
a bank account in India and for investing in securities, shares and mutual funds in India.
9. Are there any visa waivers or fast-track procedures available for foreign
individuals entering your jurisdiction as investors?
As of 16 March 2020, India has entered into bilateral agreements with more than 107
countries to waive visa requirements (some of which are yet to be enforced). Most of
these agreements exempt only diplomatic, official or service passport holders from the
requirement to obtain a visa.

Nationals of Nepal and Bhutan do not require a visa to enter India. However, citizens
of these two countries require a visa when entering India from China. Citizens of
the Maldives visiting India for a short period of up to 90 days are exempt from the
requirement to obtain a visa (as a special case), provided such citizens hold valid passports
issued by or on behalf of the government of Maldives. Such visa-free entry is allowed for
tourism purposes only.
International travellers from 169 countries can take advantage of the e-visa facility if the
sole purpose of their visit is:
• Recreation.
• Sight-seeing.
• Casual visit to meet friends or relatives.
• Attending a short-term yoga programme.
• Attending short-term courses on local languages, music, dance, arts and crafts,
cooking, medicine and so on.
• Voluntary work of a short duration (for a maximum period of one month, which
does not involve any monetary payment or consideration of any kind in return).
• Medical treatment including treatment under the Indian system of medicine.
• Business visit.
• Attendant to e-Medical visa holder.
• Attending a conference, seminar or workshop organised by a Ministry or
Department of the Government of India, State Governments or Union Territory
Administrations and so on, and their subordinate or related organisations and
Public Sector Undertakings and private conferences organised by private persons,
companies or organisations.
A Japanese and a South Korean national is eligible for visa-on-arrival if he or she is visiting
India for business, tourism, conference or medical purposes. This facility is available for
double-entry for a period of 60 days from the date of arrival. However, this facility will
not be available to a Japanese and South Korean citizen if such person or either of his
or her parents or grandparents (paternal or maternal) was born in or was permanently
resident in Pakistan. This facility is also not available to holders of diplomatic or official
passports and UN Passport holders with Japanese or South Korean nationality.

10. What are the circumstances under which an individual becomes liable to
pay tax in your jurisdiction? Can individuals be liable for tax on foreign-source
income?
An individual qualifies as a tax resident of India if the person meets the physical presence
test, which means they must either (subject to further exceptions or amplifications in
certain circumstances):
• Have been present in India during the relevant tax year, for a period of 182 days or
more.
• Have been present in India during the four years preceding the relevant tax year, in
aggregate, for a period of 365 days or more, and be present in India for a period of
60 days or more in the relevant tax year.
• Resident individuals are liable to income tax in India on their global income. Non-
resident individuals are subject to income tax in India only on income, which is
received or is deemed to be received in India, or accrues or is deemed to accrue in
India.
Investment restrictions
11. Are there any restrictions on foreign ownership and investment in specific
industry sectors? Do any formalities, permit or notification requirements
apply?
Foreign investment can be routed into India in one of the following two ways:
• Automatic route. Under this route, foreign investment is allowed without

prior approval from the RBI or the GOI in relation to all activities or sectors up to
thresholds specified in the NDI Rules.
• Government route. Under this route, prior GOI approval is required for
investment by a person resident outside India. Foreign investment received
under this route should be in accordance with the conditions stipulated by the
government in its approval. For example, foreign investment:
• beyond 49% in the defence sector wherever it is likely to result in access
to modern technology or for other reasons to be recorded. Such foreign

investment is also subject to security clearance and guidelines of the Ministry

of Defence;
• of up to 26% in print media sector (publishing of newspaper and periodicals
dealing with news and current affairs, publication of Indian editions of foreign
magazines dealing with news and current affairs);
• of up to 49% in private security agencies;
• beyond 49% in telecom services sector (other than foreign investment in
"other service providers", where foreign investment up to 100% under the
automatic route). Such foreign investment is subject to the licensing and
security conditions as specified from time to time by the Department of
Telecom, Ministry of Communications;
• of up to 51% in the multi-brand retail trading sector. Such foreign investment
is subject to certain restrictions and conditions as specified in the NDI Rules,
including minimum foreign investment required to be brought in; and
• beyond 74% in brownfield pharmaceuticals sector. Such foreign investment
is subject to certain restrictions and conditions as specified in the NDI Rules,
including restrictions on the incorporation of non-compete clauses in the
relevant investment agreements.
Foreign investment into certain sectors in India is also subject to certain prescribed
performance conditions (such as in the case of multi-brand retail, construction
development and so on).
Foreign investment in India is prohibited for the following sectors or activities:
• Lottery businesses, including government or private lotteries and online lotteries.

• Gambling and betting, including casinos.
• Chit funds.
• Nidhi companies.
• Trading in transferable development rights.
• Real estate business or the construction of farm houses.
• Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco
substitutes.
• Activities or sectors that are not open to private sector investment, such as atomic
energy and railway operations.
• Foreign technology collaboration in any form, including licensing for franchises,
trade marks and brand names. Management contracts are also prohibited for
lottery businesses and gambling and betting activities.

12.Does the government retain and exercise control over certain industry
sectors? If so how?
The GoI retains and exercises control over certain industry sectors. Control is retained
and exercised through sector-specific restrictions on foreign investments in sensitive
sectors (such as defence and media). Furthermore, specific sectoral regulators, including
the RBI, SEBI, Insurance Regulatory Authority of India (IRDA), and so on are also
empowered to issue guidelines and notifications governing the relevant sector.
In certain sectors, prior government approval is required for making foreign investment
in India. In certain sectors, foreign investment can be made only up to the prescribed
threshold(s) (either under automatic or government route) (see Question 11). Certain
sectors are not open to private investment (such as in relation to atomic energy and
railway operations).
13. Are there restrictions on foreign ownership or occupation of real estate?

Do any formalities, permit or notification requirements apply?
There are certain restrictions on foreign ownership or occupation of real estate in India
(according to the provisions of FEMA, read with the NDI Rules):
• NRIs or OCIs can acquire immovable property in India (other than an agricultural
land or farm houses or plantation property), subject to specified conditions.
• Non-residents (who are neither an NRI or an OCI), who are spouses of NRIs or
OCIs, can acquire one immovable property (provided this is not agricultural land or
farm house or plantation property), jointly with their NRI or OCI spouse, subject to
specified conditions.
• Non-residents who have established a branch, office or other place of business in
India for the purpose of any activity carrying on in India, excluding a liaison office,
can acquire any immovable property in India necessary to perform such activity,
subject to specified conditions.
• No person from Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Hong
Kong, Macau, Nepal, Bhutan or North Korea can acquire immovable property,
other than on lease for up to five years, without the prior approval of the RBI.

• A foreign embassy or diplomat or consulate general can purchase or sell immovable

property in India (other than agricultural land, plantation property or farmland),
subject to specified conditions.
• Citizens of Afghanistan, Bangladesh or Pakistan who belong to minority
communities in those countries (namely, Hindus, Sikhs, Buddhists, Jains, Parsis
and Christians) who reside in India and have been granted a long-term visa by the
GoI can purchase only one residential immovable property in India as a dwelling
unit for self-occupation and only one immovable property for the purpose of
carrying out self-employment, subject to specified conditions.
• Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal,
Bhutan, Hong Kong or Macau or North Korea require prior permission from the
RBI in order to acquire or transfer immovable property in India, other than a lease
not exceeding five years. However, this prohibition does not apply to OCIs.
Furthermore, foreign investment is not permitted for entities engaged in, or proposing
to engage in, real estate business (that is, dealing in land and immovable property with
a view to earning profit from them), the construction of farm houses and trading in
transferable development rights in India.
However, foreign investment of up to 100% under the automatic route, subject to certain
conditions, is permitted in relation to construction or development projects, which
includes development of townships, construction of residential or commercial premises,
roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities,
city and regional level infrastructure and townships.
14. Are there any minimum capital requirements for foreign investment?
India prescribes minimum capital requirements for foreign investment in sectors such
as multi-brand retail and "other financial services" (that is, financial service activities
regulated by India's financial sector regulators as notified by the GoI, such as the
RBI, SEBI, IRDA and so on, including non-banking financial companies or unregulated
financial services).
In relation to entities engaged in multi-brand retail trading activities, a minimum of

USD100 million must be brought in as foreign investment.
In relation to "other financial services", the MOF issued a press release on 16 April
2018, which prescribes a minimum FDI capitalisation of USD20 million for fund-based
activities (for example, merchant banking, underwriting, portfolio management services,
stock broking, asset management, venture capital, custodian services, factoring, leasing
and finance, housing finance, credit card business, micro credit, and rural credit).

Furthermore, a minimum FDI capitalisation of USD2 million is required for non-fund

based activities (for example, investment advisory services, financial consultancy, forex
broking, money changing business and credit rating agencies). For companies engaged in
such activities that are regulated by any financial sector regulator (such as SEBI, IRDA,
RBI, and so on), the FDI Policy permits 100% foreign investment under the automatic
route.
The relevant regulator or government agency (regulating the relevant financial service)
can also prescribe conditions for foreign investment, including any norms for minimum
capital requirements.
The Companies Act no longer requires companies incorporated in India to have any
minimum paid-up share capital before commencing their business.
15. Are there any exchange control or currency regulations? Are there any
restrictions on the remittance of profits abroad?
In India, all transactions subject to foreign exchange are regulated by FEMA.
FEMA regulates two types of foreign exchange transactions:
• Capital account transactions.

• Current account transactions.
The GoI, MOF and the RBI administer various provisions of FEMA.
For remittance of profits abroad, the following rules apply:
• Dividends on foreign investments (net of applicable taxes) can be remitted freely.

• Branch offices can remit profits from a branch, net of applicable Indian taxes,
outside India.
• Project offices can remit intermittent remittances pending winding-up or
completion of the project.
• Foreign entities have general permission to remit the surplus on winding up or
completion of projects.
The NDI Rules define the phrase "investment on repatriation basis" to mean an
investment, the sale or maturity proceeds of which are, net of taxes, eligible to be
repatriated out of India. Remittance of profits (from investments in India) is generally
permitted in the case of investment under the FDI route, as such investment is made

on a repatriable basis. However, in certain sectors where securities held by a foreign

investor are subject to lock-in restrictions, such as with "construction development", the
NDI Rules permit the investor to transfer its stake to another person that is resident
outside India, within the lock-in period without repatriation of foreign investment.
Furthermore, NRIs and OCIs are permitted to purchase capital instruments of an Indian
company or limited liability partnerships (LLPs) or a firm or proprietary concern, subject
to certain conditions, on a non-repatriation basis. Furthermore, where a non-resident
person exercises an employee stock option issued to him or her when he or she was
previously resident in India, such person must hold the shares on a non-repatriation
basis.
Furthermore, under the Liberalised Remittance Scheme (LRS), a resident individual

can remit funds abroad for permitted current and capital account transactions or a
combination of both. However, the LRS is not available to any corporates, partnership
firms, trusts and so on.
The limit of remittance is subject to change, depending on the foreign exchange position.
The present limit is USD250,000 per financial year. In addition, the LRS can be used by
resident individuals to set up joint ventures or wholly owned subsidiaries outside India
for bona fide business activities up to a limit of USD250,000 (subject to the requirements
set out in FEMA).
Imports
16. Are there any restrictions on the importation of commercial goods?
Import of goods in India is currently governed by the:
• Foreign Trade Policy (2015-2020) of India (FTP).

• Foreign Trade (Development and Regulation) Act 1992.
• Customs Act 1962 (Customs Act).
• Customs Tariff Act 1975 (Customs Tariff Act).
Import trade is regulated by the:
• Directorate General of Foreign Trade (DGFT) (part of the Ministry of Commerce

and Industry).
• Department of Commerce.

• Customs authorities (part of the Department of Revenue).

• MOF.
Every person proposing to engage in the import of goods must obtain an Importer-
Exporter Code (IEC) from the DGFT before engaging in such import. Although most
goods are freely importable, some goods are either completely prohibited from being
imported into India or are restricted which can only be imported after obtaining a specific
import licence.
An exact Harmonised System Nomenclature (HSN) classification (which is based on the

harmonised classification of goods created by the World Customs Organization (WCO) of
the product is required to determine whether the goods can be imported freely, or whether
they are restricted or prohibited under the FTP.
17. What import duties apply to commercial goods?
Import of most non-agricultural goods or products in India currently attracts customs

duty at an effective rate ranging from 16.55% to 42.08% depending upon the classification
of products and the same is payable by the importer. Certain exemptions are available on
a case-by-case basis which may further reduce the effective rate of duty. Customs duty is a
type of indirect or transaction tax levied on goods imported into and exported out of India
(the taxable event being the import into or export from India). The exact rate of customs
duty on a product depends on the HSN classification of the product.
The Customs Act provides the basic rules for levy and collection of customs duties and
provides details of India's:
• Levy and collection of duty on imports and exports.

• Import and export procedures.
• Prohibitions on importation and exportation of goods.
• Penalties, offences and so on.
Furthermore, the Customs Tariff Act makes provisions for duty rates, additional duty,
preferential duty, anti-dumping duty, protective duties and so on.
Effective customs duties include the following components:
• Basic customs duty.

• Additional customs duty in lieu of excise and sales tax for goods that are outside
the purview of the GST like alcohol for human consumption and various petroleum
products.
• Integrated Goods and Services Tax (IGST).
• GST compensation cess on certain sin or demerit goods like tobacco, motor
vehicles, aerated drinks and so on.
• Social welfare surcharge.
• Health cess on import of specified medical equipment.
The GoI has provided certain exemptions on whole or part of the customs duty on various
products.
The duties can be levied either on a specific or on an ad valorem basis (there are
circumstances in which a hybrid of a specific and ad valorem duty may be collected on
imported items).
The Central Board of Indirect Taxes and Customs (CBIC) is the central regulating body
for customs and other indirect taxes like GST. The CBIC is a part of the Department of
Revenue under the MOF.
18. Are the safety regulations and standards applicable to commercial goods
in your jurisdiction compatible with other standards that are recognised
internationally?
Indian regulations that address safety and standards for commercial goods and services
are usually sector specific. For example, the Food Safety and Standards Act 2006 regulates
the safety standards for all food products in India (whether manufactured domestically
or imported into India).
If bound by an international treaty, the GoI strives to ensure that the domestically created
requirements are aligned with international treaty obligations. There are also well-
established institutions that focus on aligning international obligations with domestic
regulations, to ensure compatibility is maintained.

19. Are there any similar or equivalent restrictions on providing services into
another jurisdiction?
There are no restrictions on the importation of commercial services under the FTP or
customs laws in India. However, import of nuclear, defence, national security and other
such services may be restricted. Tax on services is levied under the GST laws.
The importation of services in India attracts GST if the place of supply of the service falls
within India's GST legal regime. According to India's GST laws, GST is:
• Levied generally at a rate ranging from 5% to 28% depending upon the nature and
classification of services.
• Paid by the service importer (that is, the service recipient under the reverse charge
mechanism).
Structuring and tax
20. How is foreign investment into your jurisdiction typically structured?

What forms of legal vehicle are attractive to foreign investors?
Forms of foreign investment in India

An Indian company can receive foreign investment from a non-resident in the following
forms:
• FDI. This is investment through equity instruments by a person resident outside

India, where the investment is either:
• in an unlisted Indian company; or
• in 10% or more of the post issue paid-up equity capital on a fully diluted basis
of a listed Indian company.
• Foreign portfolio investment (FPI). An FPI is any investment made by a

person resident outside India in equity instruments, where the investment is either:

• less than 10% of the post issue paid-up share capital on a fully diluted basis of a
listed Indian company; or
• less than 10% of the paid-up value of each series of equity instruments of a
listed Indian company.
• Investment by Foreign Venture Capital Investor (FVCI). An FVCI is

an investor incorporated and established outside India and registered with the
Securities and Exchange Board of India (SEBI) under the SEBI (Foreign Venture
Capital Investors) Regulations 2000.
• Investments in investment vehicles and depository receipts. The
following rules apply in relation to these:
• An "investment vehicle" means an entity registered and regulated under
relevant regulations framed by SEBI or any other designated authority and
includes real estate investment trusts (REITs), infrastructure investment trusts
(InvIts) and alternative investment funds (AIFs). A non-resident (other than a
citizen of Bangladesh or Pakistan, or an entity incorporated in Bangladesh or
Pakistan) is permitted to invest in units of an investment vehicle, subject to the
provisions of the NDI Rules.
• A "depository receipt" (DR) is a foreign currency denominated instrument,
whether listed on an international exchange or not, issued by a foreign
depository in a permissible jurisdiction on the back of eligible securities
issued or transferred to that foreign depository and deposited with a domestic
custodian and includes "global depository receipt" as defined in the Companies
Act 2013 (Companies Act). A non-resident may invest in the DRs issued by
foreign depositories against eligible securities in accordance with the provisions
of the NDI Rules.
Legal vehicles for foreign investment

The legal vehicles used to attract foreign investors and structuring foreign investment are
as follows:
• Indian company. Foreign investment into an Indian company by way of a share

subscription or share acquisition is a common structure for foreign investment
into India. A foreign company or investor can commence operations in India by
incorporating a company in India under the Companies Act, as a wholly-owned
subsidiary or as a joint venture with the joint venture partner.
Foreign investment is permitted up to 100% under the automatic route in
sectors or activities other than those where foreign investment is restricted
up to the limits indicated against certain sectors or activities under the FDI
Policy or the NDI Rules (see Question 11). Details of the FDI Policy can be
obtained from the website of DPIIT (https://dipp.gov.in/sites/default/files/

CFPC_2017_FINAL_RELEASED_28.8.17.pdf). Details of the NDI Rules can be

obtained from the central government's e-gazette website (http://egazette.nic.in/
WriteReadData/2019/213332.pdf).
Indian companies are subject to entity-level taxation and distribution taxes.
• Foreign company. Foreign companies can set up their operations in India
through any of the following offices, which can undertake any of the permitted
activities. Such companies must register themselves with the concerned Registrar of
Companies within 30 days of setting up a place of business in India:
• liaison office (LO). LOs are set up as a representative office in India, which
are used primarily to explore and understand the business and investment
climate of India. LOs cannot undertake any commercial, trading or industrial
activity, directly or indirectly. An LO set up in India in accordance with the
RBI's regulations will not attract any tax liability in India (on the face of it),
unless it constitutes a "business connection" with India as stipulated under the
Income Tax Act 1961 (IT Act), or a permanent establishment in India under the
applicable DTAA.
• project office (PO). Foreign companies planning to execute specific projects
in India can set up temporary project or site offices in India. RBI has granted
general permission to foreign entities to establish POs subject to specified
conditions (for example, such offices cannot undertake or carry on any activity
other than the activity relating and incidental to the execution of the project).
POs can remit the surplus of the project outside of India on its completion,
although general permission for this must be granted by the RBI. Typically,
a PO qualifies as a "permanent establishment" of the foreign enterprise.
Therefore, all profits attributable to such a project office are taxed in India (see
Question 21).
• branch office. A branch can be set up in India for undertaking business
operations in India. A branch typically qualifies as a "permanent
establishment" of the foreign enterprise. Therefore, all profits attributable to
such branch are taxed in India (see Question 21). Presently, India does not
impose any branch profits tax on foreign companies.
• Limited Liability Partnership. Foreign investment can also be structured in the

form of LLPs, which are not subject to distribution taxes.
21. What are the circumstances under which a business becomes liable to pay
tax in your jurisdiction?
Foreign enterprises are taxable in India on income which is either:

• Received or deemed to be received in India.

• Accrued or deemed to accrue in India.
The following income is deemed to accrue in India:
• Income which accrues directly or indirectly, through or from any business

connection in India.
• Income which accrues through or from any property, asset or source of income in
India.
• Income which accrues through the transfer of capital assets situated in India.
If a tax treaty exists between India and the country of residence of the foreign enterprise,
one of the following will apply (whichever is more beneficial):
• The provisions of domestic law.

• The provisions of the tax treaty.
Accordingly, the taxability of the foreign enterprise may be restricted or modified, and/
or lower tax rates may apply.
In general, India's tax treaties provide that foreign enterprises will only be taxable for
business profits in India if the business profits are attributable to the foreign enterprise's
"permanent establishment" in India.
India's tax treaties typically embrace the following types of permanent establishment:
• Fixed-place permanent establishment. This can arise if a foreign enterprise

has a fixed place of business in India, through which it partly or wholly carries on
its business.
• Agency permanent establishment. A dependent agent's permanent
establishment can arise if a foreign enterprise has a dependent agent in India, who
undertakes certain specified activities in India.
• Service permanent establishment. This can arise if a foreign enterprise has
employees in India, who are rendering services for the foreign enterprise for a
specified duration.
Further, depending on the nature of the business transactions, such business may also be
liable to pay indirect or transactional taxes, such as excise duty, goods and services tax,
value added tax (VAT) and so on.

From financial year 2016/17 onwards, a foreign company can qualify as a tax resident of
India if its place of effective management is situated in India during such year and may
therefore be subject to Indian income taxes on its global income.
22. What are the main business tax rates?
Income tax
Domestic companies. For the financial year 2020/21, domestic companies are taxed
at a rate of 25% if they had a turnover of up to INR4 billion during the 2018/19 financial
year and at 30% if the turnover exceeded this threshold (plus an applicable surcharge of
7% or 12%, depending on the taxable income of the company (see below) and a health
and education cess of 4%). The surcharge is imposed on the taxes payable by domestic
companies at the following rates:
• If the income of the company is up to INR10 million: a 0% surcharge is payable.

• If the income of the company is more than INR10 million: a 7% surcharge is
payable.
• If the income of the company is above INR100 million: a 12% surcharge is payable.
Domestic companies also have the option of paying a flat tax rate of 22% (plus applicable
surcharge and cess) provided they forego substantially all exemptions and incentives
under the IT Act.
New manufacturing companies (incorporated on or after 1 October 2019) similarly have

the option of paying a flat rate of 15% (plus applicable surcharge and cess) on the
business income from the manufacturing activities, provided they forego substantially all
exemptions and incentives under the IT Act.
Short-term capital gains are taxed at 30% (25.17% if the 22%/15% rate is opted for) (plus
an applicable surcharge of 7% or 12%, and health and education cess of 4%) in the hands
of domestic companies. Long-term capital gains may be taxed at 10% or 20% (plus an
applicable surcharge of 7% or 12% and health and education cess of 4%) depending on
the nature of the capital asset transferred.
In the case of transfer of listed securities on the market, where securities transaction
tax (STT) is payable, long-term capital gains in excess of INR100,000 are taxable at the
concessional rate of 10% (plus applicable surcharge and cess) (without giving effect to
the benefits of indexation and neutralisation of foreign exchange fluctuation). Similarly,
short-term capital gains for such listed securities is taxable at 15% (plus applicable
surcharge and cess). For these concessional rates to apply:

• The sale of the shares must have been on the stock exchange.
• The shares must have been acquired pursuant to a transaction which was subject to
STT or such transaction must be a notified transaction.
Domestic companies (other than companies opting for the beneficial tax rates of 22% or
15%, as discussed above) are also subject to a minimum alternate tax (MAT), which is
a presumptive tax on book profits (that is, profits shown in their financial statements),
which applies if the tax payable under the regular provisions is less than 15% of the
company's book profits. MAT is payable at 15% plus:
• A surcharge of 7% or 12%.
• A health and education cess of 4%.
Credit for MAT paid can be carried forward for the next 15 years and set-off against tax
payable under regular tax provisions.
Domestic companies are subject to a tax of 23.3% (inclusive of surcharge and cess) at the
time of buying back their shares from its shareholders (buy back tax). This tax is payable
on the difference between the buy-back price and the issue price of shares. Income in
respect of such buy back by the company is tax exempt in the hands of shareholders.
Dividend payments are now subject to withholding by the domestic company and are
taxable in the hands of the shareholders. The erstwhile dividend distribution tax regime
has been substituted with withholding tax. The withholding rate for dividends paid to
non-residents is 20% (plus applicable surcharge and cess) subject to a lower rate provided
under the respective DTAA, as applicable.
Foreign companies. Foreign companies are taxed at 40% (plus an applicable surcharge
of 2% or 5% (see below), and health and education cess of 4%) (the 40% rate is subject to
rates provided under the relevant tax treaty, if the tax treaty is more beneficial).
The surcharge is imposed on the taxes payable by domestic companies at the following
rates:
• If the income of the company is up to INR10 million: a 0% surcharge is payable.

• If the income of the company is more than INR10 million: a 2% surcharge is
payable.
• If the income of the company is above INR100 million: a 5% surcharge is payable.
Short-term capital gains are taxed at 40% (plus an applicable surcharge of 2% or 5%, and
health and education cess of 4%) in the hands of foreign companies. Long-term capital
gains may be taxed at the rate of 10% or 20% (plus an applicable surcharge of 2% or
5%, and a health and education cess of 4%) depending on the nature of the capital asset
transferred.

Foreign companies are not subject to buy back tax. However, they are subject to MAT if
they have a permanent establishment or tax presence in India.
Further, receipt of interest, royalties and fees for technical services (FTS) sourced from
India by foreign companies are subject to withholding tax at applicable rates on a
gross basis. However, if the royalties and FTS are attributable to the foreign company's
permanent establishment in India, such royalties and FTS are taxed as business profits
at 40% (plus an applicable surcharge of 2% or 5%, and a health and education cess of 4%
on a net basis).
For withholding tax rates, see Question 23.
Indirect tax
In addition to income tax, various indirect taxes are levied either at the federal or state
level, depending on the nature of the business transaction/taxable event in India.
The GoI levies the following major indirect taxes in India:
• Customs duty. This is imposed on the import of goods into India and export of
goods outside India. Currently, the effective rate of customs duty on the import of
most non-agricultural products in India ranges from 16.55% to 42.08% depending
upon the classification of the product. Customs duty on exports is mostly at 0%,
except for specified goods.
• Central excise duty. This is a tax levied on the manufacture of certain petroleum
products.
• Central sales tax (CST). This is levied on the intra-state or inter-state sale of
goods respectively, which are outside the purview of GST like alcohol for human
consumption and certain petroleum products in India.
• GST. This is levied on the supply of goods or services within India. All intra-state
supply of goods and services attract two taxes:
• central GST (CGST); and
• state GST (SGST).
Similarly, all inter-state supply of goods attracts a tax known as IGST. IGST is a
total of the CGST and SGST (which would have been applicable to the intra-state
supply of such goods or services). The GoI collects the IGST, retains the tax equal to
the CGST levied on such supplies and distributes the balance (SGST component) to
the state where the supply takes place.
• GST compensation cess. This is levied over and above GST on supplies of
certain restricted goods such as tobacco, motor vehicles, aerated drinks and so on.
The respective states of India levy the following taxes (the rates of which varies from to
state to state):

• State excise duty. This tax is levied on the manufacture of alcohol (meant for
human consumption).
• VAT. This is levied on a sale which takes place within a particular state of India
on goods which are outside the purview of GST such as alcohol for human
consumption and certain petroleum products.
• Professional tax. In certain states such as Gujarat, Karnataka, Maharashtra
and Andhra Pradesh, a professional tax is levied on every person engaged in any
profession, trade, calling or employment. The bands of professional tax vary from
state to state subject to the maximum of INR2,500 per year.
23. What is the tax treatment in your jurisdiction of profits from an investee
company remitted outside your jurisdiction by an investor?
The former dividend distribution tax (DDT), levied on companies distributing a dividend,
has been substituted with withholding tax on dividend distributions with effect 1 April
2020. Domestic companies are now required to withhold tax at the applicable rates on
the dividend distributed to the respective shareholders. The dividend income is taxable
in the hands of the shareholder at the rates applicable to them.
Similarly, domestic companies are subject to a buyback tax at the time of buying back
their shares (not being listed company shares) from their shareholders.
Additionally, repatriation of funds as interest, royalties or FTS may also be subject to

withholding tax in India on a gross basis.
Foreign enterprises are subject to withholding tax of 10% (plus an applicable surcharge
of 2% or 5%, and a health and education cess of 4%) on royalties and FTS on a gross basis.
For the surcharge rates, see Question 22, Income tax.
Foreign enterprises are subject to income tax on interest income at the rate of 40% (plus
an applicable surcharge of 2% or 5%, and a health and education cess of 4%). However,
foreign enterprises may avail themselves of concessional rates on interest income under
different circumstances ranging from 5% to 20% (plus an applicable surcharge of 2% or
5%).

24. What transfer pricing and/or thin capitalisation restrictions may apply to
investments into your jurisdiction from elsewhere?
Transfer pricing
Under India's transfer pricing regulations, any international transaction and/or a
specified domestic transaction between two or more associated enterprises (including
permanent establishments) must be at an arm's-length price.
The transfer pricing regulations require the application of the most appropriate method
among the following:
• Comparable uncontrolled price method.

• Resale price method.
• Cost plus method.
• Profit split method.
• Transactional and net margin method.
Taxpayers entering into international transactions and/or specified domestic

transactions must maintain prescribed documents and furnish an accountant's report,
which includes prescribed details. Indian transfer pricing regulations also allow for
secondary adjustments subject to certain conditions.
India's income tax law empowers the Central Board of Direct Taxes (CBDT) to enter
into an Advance Pricing Arrangement (APA) to determine the arm's-length price (or the
manner of determining the arm's length price) in relation to the international transactions
to be entered into by a person for a period specified in such APA, not exceeding five
consecutive years. The CBDT can also enter into APAs which apply retrospectively for a
period of the last four years.
In addition to APAs, India's domestic tax law also provides for safe harbour rules.
Thin capitalisation rules

Thin capitalisation rules were introduced in India with effect from the 2018/19 financial
year, in line with the recommendation of the OECD Base Erosion and Profit Shifting
(BEPS) Action Plan 4. These provide that where an Indian company, or a permanent
establishment (PE) of a foreign company in India, pays interest in respect of any debt
issued by a non-resident associated enterprise (AE) that exceeds INR10 million, which
is otherwise a deductible business expenditure, the deductible interest expense will
be limited to 30% of its earnings before interest, taxes, depreciation and amortisation
(EBITDA) or actual interest (whichever is less).

Furthermore, debt provided by a lender (other than an AE) will also be de facto considered
as debt provided by an AE if the debt is implicitly or explicitly guaranteed by the AE or
the AE deposits corresponding and matching amount of funds with the lender. However,
a carry-forward of the disallowed interest expense is permitted for up to eight assessment
years immediately succeeding the assessment year in which the disallowance was first
made, and is allowed as a deduction against the profits and gains (if any) of any business or
profession that is carried on by the taxpayer (to the extent of maximum allowable interest
expenditure).
The thin capitalisation rules do not apply to an Indian company or a PE of a foreign

company in India that is engaged in the business of banking or insurance.
Incentives
25. What tax incentive or other schemes exist to encourage foreign

investment?
To stimulate India's economy, India's tax law provides tax incentives such as tax holidays,
deductions and rebates to the industry. These are intended to encourage:
• Exports and manufacturing activities.

• The setting up of new industrial undertakings.
• The development of facilities related to infrastructure.
• The software industry, research activities and development of backward areas.
Furthermore, there are certain sector-specific incentive schemes for handicraft,

agriculture, oil and gas, renewable resources, research and development, power
generation and specified service sectors, subject to the exact nature of business and goods
involved (see below).
Special economic zones

Entrepreneurs with business units located in special economic zones (SEZs) are eligible
for an income tax holiday for ten years (100% exemption for the first five years and 50%
exemption for the next five years) on the profits derived from exports from the year in
which such a business unit begins manufacturing or commences its business activities.
A deduction of 50% of profits is also available for another five consecutive years on the
fulfilment of certain conditions.

This tax holiday is enjoyed by units set up in an SEZ provided that the manufacturing
operation commences on or before 31 March 2021.
SEZ units and developers must pay a MAT on book profits and DDT on income distributed
as dividends.
Offshore banking units and international financial services centres located in SEZ are
allowed:
• 100% deduction on income for five consecutive years.

• 50% deduction for the next five consecutive years.
In addition, the following indirect tax benefits are available to a unit registered as an SEZ,
subject to the fulfilment of specified procedural conditions:
• Exemption from the payment of duties of customs on imported goods.

• Exemption from the payment of GST on domestically procured goods or services.
• Exemption from GST if goods manufactured by an SEZ are exported outside India.
• Exemption from excise, CST or VAT on the purchase of goods which are outside the
purview of GST such as petroleum products, if such goods are meant to carry on the
authorised operations of SEZ unit.
In addition, under the FTP of India, units undertaking to export their entire production
of goods and services can be set up under the following schemes:
• Export Oriented Units (EOU) Scheme.

• Electronics Hardware Technology Park (EHTP) Scheme.
• Software Technology Park (STP) Scheme.
• Bio-technology Park (BTP) Scheme for the manufacture of goods and rendering of
services.
Investment-linked incentives for research and development

The IT Act allows a deduction of capital expenditure incurred by the taxpayer on scientific
research related to the business carried on by the taxpayer, subject to the fulfilment of
certain prescribed conditions.
Investment-linked tax incentives for research and development are provided by way of
allowing deductions, ranging between 100% and 150%, in respect of the expenditure of
capital nature incurred wholly and exclusively, for the purposes of certain research and
development (R&D) during the financial year in which such expenditure is incurred. Such
investment-linked tax incentives are also available if the payment is made to either:

• A research association or university, college or other institution for scientific

research.
• An Indian company to be used for scientific research and development that fulfils
certain conditions.
Indian tax incentives to IFSCs

With a view to incentivise the growth of International Financial Services Centres (IFSCs),
the IT Act contains the following tax incentives:
• Concessional rate of 10% (plus applicable surcharge and cess) from long-term
capital gains tax arising from transactions undertaken in foreign currency on a
recognised stock exchange located in an IFSC, irrespective of payment of STT on
the same.
• A concessional short-term capital gains tax rate of 15% will be available to the
transactions undertaken in foreign currency through a recognised stock exchange
located in an IFSC, even where no STT is payable. The Finance Act 2018 has
exempted transactions in foreign currency in the following assets by a non-resident
on a recognised stock exchange located in any IFSC from capital gains tax:
• bond or global depository receipt;
• rupee denominated bond of an Indian company; or
• derivative.
• Units located in IFSC and which derive income solely in convertible foreign
exchange are chargeable to MAT at the rate of 9%. Even existing units can benefit
from a lower MAT rate of 9% (subject to the fulfilment of other conditions).
The Finance Act 2018 has also extended the lower MAT rate to non-corporate
taxpayers.
• Tax on distributed profits is not charged in respect of the total income of a company
being a unit located in an IFSC, deriving income solely in convertible foreign
exchange, either in the hands of the company or the person receiving the dividend.
• Interest paid by an offshore banking unit on deposits or borrowing made on or after
1 April 2005 by non-residents is tax exempt.
• IFSC units can benefit from a 100% exemption from income tax for its approved
business for the first ten consecutive assessment years commencing from the year
in which the permission from the RBI, SEBI or IRDAI (as applicable) is obtained,
out of a block of 15 assessment years.
Investment guarantees

26. What legal guarantees exist against expropriation and/or provide for
appropriate compensation? What is your government's track record in this
regard?
The best guarantor for investment protection is a stable and democratic political
structure, a belief in the rule of law, along with a transparent and independent legal
system.
India has concluded multiple BITs with various countries. These BITs contain reciprocal
protections for the purpose of encouraging, promoting and protecting investments in each
other's territory by the companies based in either country (or state). These agreements
typically provide that if the host state expropriates the investor's investment, the host
state must pay prompt, adequate and effective compensation to the investor. These BITs
also:
• Provide a legal basis for enforcing the rights of the investors though international
arbitration.
• Give assurance to the investors that their foreign investments will be guaranteed
fair and equitable treatment, as well as full and constant legal security.
Recently, India has terminated some of its BITs and is trying to renegotiate them.
India has been a respondent in 30 investment arbitration claims. Of these claims, 17

are still pending, and ten have been amicably settled between the investor and the
Government of India. To date, in two BIT cases, the investors (White Industries and
Devas) have prevailed in the arbitration against India. In September 2018, the GoI has
had its first win in a BIT arbitration. The GoI was successful in defending the claims
brought by a French investor (Louis Dreyfus Armateurs SAS) under the India-France BIT.
For details of bilateral investment treaties with India, see Question 7.
27. Are there any issues in relation to the enforcement of intellectual property
rights?

India ratified the agreement establishing the WTO. This contains (among other things)
India being signatory to the Agreement on Trade Related Aspects of Intellectual Property
Rights (TRIPS), which came into force from 1 January 1995.
TRIPS sets out minimum standards for protection and enforcement of intellectual
property rights (IPRs) in WTO member countries, which are required to promote the
effective and adequate protection of IPRs (including legal systems and practices) with a
view to reducing distortions and impediments to international trade. TRIPS provides for
norms and standards in relation to the inter alia, the following:
• Patents.
• Trade marks.
• Copyrights.
• Industrial designs.
• Geographical Indication.
• Integrated Circuit Layout.
The Indian judicial system provides for effective enforcement of the various forms of
IPRs and has played a proactive role in recognising the changing phases of intellectual
property.
Courts have been effectively and progressively protecting and enforcing patent rights.
This is demonstrated by the upward trend of lawsuits and the interim injunctive
relief granted by various courts. In respect of patents, the courts have been especially
proactive in affording protection to Standard Essential Patents (SEPs). In respect of
telecommunication technologies, the courts have taken a balanced approach in terms
of enforcement of pharmaceutical patents, with interim injunctions being granted for
alleged infringements. A major issue in this regard concerns the principles relating to the
enforcement of SEPs. Since it is impossible to practise a technological standard without
implementing a patent that is essential to that standard (an SEP), those implementing
SEPs (for example, manufacturers, traders or vendors of products adopting a standard)
must first obtain a licence from the respective SEP holder or face an injunction.
An absence of any guidelines for the negotiations between SEP holders and those
implementing the SEP has resulted in SEP holders demanding excessive royalties.
The courts in India have also supported anti-counterfeiting and piracy measures to both:
• Safeguard the property of rights holders.

• Protect the public interest.
In cases of infringement of trade marks, the courts have recognised cross-border

reputation of trade marks in safeguarding the interest of rights holders.

The courts have granted injunctions against infringers and have issued directions in
specific cases to customs officials to prevent, control and prohibit the import of goods that
violate a party's registered IPRs. However, a recent amendment to the relevant rules has
excluded patents from the scope of the border control measures.
When dealing with intellectual property litigation, the Indian courts have been open to
adopting new methodologies for recording evidence which can be more efficient than
traditional methods. One such example is the courts adopting the mechanism of "hot
tubbing" experts for leading evidence in SEP matters. To this end, the Delhi High Court
Rules have been amended to incorporate this mechanism.
28. Are there any issues in relation to the gaining and enforcement of
judgments and/or arbitral awards?
In India, arbitration is a medium which provides an effective and quick dispute resolution
framework, unlike court proceedings which take a number of years to resolve disputes.
The Arbitration and Conciliation Act 1996 (Arbitration Act) is divided in the following
two parts:
• Part I. This deals with arbitration conducted in India and its enforcement.
• Part II. This provides for arbitration conducted in foreign jurisdictions and the
enforcement of foreign awards.
The Arbitration Act was amended in 2019, which brought some significant changes. Some
of the key amendments include the setting-up of the Arbitration Council of India, which
now has the power to grade arbitrators and arbitral institutions. The 2019 amendments
are in line with the objective of building India as a robust and arbitration-friendly
jurisdiction for foreign investors.
To facilitate expeditious arbitral proceedings, the 2019 amendments have included

provisions which now require pleadings (that is, statements of claim and statements of
defence) to be completed within six months from the date on which the arbitrator (or all
arbitrators if applicable) receives notice of his or her appointment.
The 2019 amendments also relaxed the stringent time-period for an arbitral tribunal to
render its award. Previously, under the unamended Arbitration Act, the tribunal had
to pass its award within 12 months from the date the arbitrators entered reference
(that is, the date on which the arbitrator or all the arbitrators (as applicable) received
written notice of their appointment). With the 2019 amendments, the 12-month period
commences from the date of completion of pleadings, effectively extending the time limit
for the arbitral tribunal to pass an award by an extra six months.

As already remedied by the earlier 2015 amendments, under the Arbitration Act, foreign
investors can effectively realise a potential award in their favour by securing assets in
India and can take recourse to Indian courts for assistance in taking evidence and appeals
against interim orders.
Once proceedings are concluded, the parties can file applications to set aside the award in
court under section 34 of the Arbitration Act (which must be disposed of within a period
of 12 months by the court). Any order of the court (whether setting aside or refusing to
set aside the award) can be appealed before the court of competent jurisdiction under
section 37 of the Arbitration Act. Once the objections to the award are dismissed, the court
enforces the award in the same manner as a decree of a court.
The 2015 amendments clarified the scope of the term "public policy", which was
frequently used by the Indian courts as a ground for the setting aside of arbitral awards.
The 2019 amendments further narrowed the provision. While the earlier unamended
provision in the original Arbitration Act required a party to furnish proof of the grounds
that would justify interference with an award, the 2019 amendment clarifies that any such
grounds only need to be established according to the record which was before the arbitral
tribunal. In simpler terms, in order to set aside an arbitral award, a party cannot rely on
a ground, which was not placed before the arbitral tribunal.
With 2019 amendments, the Indian legislature has shown considerable and much needed
action in establishing India as an (international) arbitration-friendly judicial system.
Recent developments and proposals for reform
29. Have there been any significant recent or proposed legal developments
affecting investors?
There have been a number of recent legal developments which affect foreign investors.
Some of the key recent developments are set out below.
Recent amendments to FDI Policy

The FDI Policy has recently been amended so that the entity of a country that shares a
land border with India (adjoining nation) or where the beneficial owner of an investment
into India is situated in or is a citizen of any adjoining nation, can only invest under
the government route. Furthermore, approval from the GoI is also required where
subsequent changes in beneficial ownership (by way of direct or indirect transfers) of any
existing or future FDI would result in any such beneficial ownership falling within the

purview of the first restriction. These amendments are expected to affect investment from
such countries into India.
E-commerce Policy
The E-commerce Policy is expected to have a significant impact on foreign investors
investing on Indian E-commerce platforms as it requires such investors to (among other
things) set up a domestic data centre for the collection and storage of data in India and
not exercise ownership or control over the inventory sold on their platforms.
Data privacy law

The draft Personal Data Protection Bill (PDP Bill) was introduced in the Indian
Parliament in December 2019. The draft PDP Bill aims to create a regulatory framework
to protect individuals' privacy relating to their personal data and set down organisational
and technical standards in relation to the processing of data similar to the EU General
Data Protection Regulation ((EU) 2016/679) (GDPR). The PDP Bill is currently under
deliberation by a Joint Committee of the Indian Parliament and may undergo further
changes before it is presented before the Parliament.
Consumer Protection Act 2019 (CP Act)

The CP Act replaces the former Consumer Protection Act 1986. The CP Act establishes
new rules and procedures relating to:
• The emerging delivery systems of goods and services in India such as e-commerce,
direct selling, tele-shopping, multi-level marketing and global supply chains.
• New forms of unfair trading and unethical business practices (including misleading
advertising and unfair contracts).
• The establishment of a regulator with extensive powers to regulate and penalise
violations of the CP Act and product liability action for defective products or
deficient services.
• Terms such as product liability, unfair contracts, spurious goods, consumer rights,
express warranties, injury, harm, misleading advertisement, endorsement, which
are now specifically defined.
• E-filing of consumer complaints.
30. Are there any planned or on-going treaty negotiations or political

developments that could have an impact on your jurisdiction's bilateral

relationships with other nations and/or other economic, customs or monetary

unions, free-trade areas or markets?
The MLI entered into force on 1 October 2019 and applies to various DTAAs from 1
April 2020. The MLI is a unique instrument developed by the OECD to prevent base
erosion and profit sharing (BEPS) (see Question 7). The MLI will enable the signatories
to implement BEPS principles swiftly, as it covers a large number of tax treaties.
India has listed 93 of its BITs in the final MLI position. The MLI will come into effect for
any treaty from 1 April 2020 (financial year 2020-21) if:
• India has listed that tax treaty in its final MLI position as a covered tax agreement
(CTA).
• The tax treaty partner is a signatory to MLI.
• The tax treaty partner has also deposited its instrument of ratification on or before
30 June 2019.
• The tax treaty partner has also listed India in its final MLI position as a CTA.
Some of the key Indian tax treaties for which MLI will enter into force from 1 April 2020
are Australia, Finland, France, Ireland, Japan, Netherlands, Singapore, the UK and the
UAE.
Contributor profiles
Shardul S Shroff, Executive Chairman
Shardul Amarchand Mangaldas & Co

T +91 114 161 4094
F +91 112 692 4900
E shardul.shroff@amsshardul.com
W www.amsshardul.com
First Law International Member Firm (Chambers Global Elite

Network)
Professional qualifications. B. Com (Hons), Sydenham College Mumbai;

LLB, Government Law College, Mumbai
Areas of practice/experience. More than 38 years of experience in general

corporate, M&A, insolvency and bankruptcy, securities law, disinvestment

and capital markets; head of the insolvency and bankruptcy practice; leading
authority on matters related to corporate governance, M&A; government
regulation and bankruptcy and insolvency law.
Recent transactions
• Represented State Bank of India for initiation of the insolvency

proceedings before the National Law Company Tribunal against
Bhushan Steel (representing and advising Committee of Creditors in the
corporate insolvency process initiated against Bhushan Steel Limited
and representing and advising the resolution professional in a corporate
insolvency resolution process for Bhushan Power and Steel).
• Advised in Oil and Natural Gas Corporation's acquisition of a 37.5% stake
in MRPL from Aditya Birla Group and then increasing its stake to about
71% in the debt restructuring process.
• Advised the Indian Oil Corporation in relation to the merger of IOBL, a
100% subsidiary of IOC and a thinly capitalised company into its holding
company.
• Advised Videocon Hydrocarbon Holdings in relation to the sale by
Videocon Mauritius Energy Limited of its 100% stake in Videocon
Mozambique Rovuma 1.
• Advised PVR on its acquisition of the entire promoter stake (69.27%) in
Cinemax India.
• Advised Vodafone India on the consolidation of its operating
telecommunications licensee subsidiaries with a single Indian flagship
entity.
Languages. English, Hindi, Gujarati, Marathi
Professional associations/memberships
• Member of the Insolvency Law Committee, constituted by GOI to review

the implementation of the Insolvency and Bankruptcy Code under the
Chairmanship of Mr Injeti Srinivas.
• Member of the Injeti Srinivas Committee constituted for decriminalisation
of offences under the Companies Act and the Committee on cross-border
insolvency.
• Chairman of the CII National Committee on Legal Services and
Arbitration.
• Member of the CII National Council on Services.
• Member of the CII Task Force on the Ease of Doing Business, 2017-2018.

• Independent director on significant boards of Indian companies.

• Member of the US-India Business Council.
• Vice Chair of the Corporate Counsel Committee of the IPBA Council, the
Union Internationale Des Advocats, and the Indo-German Chamber of
Commerce.
• Senior Vice President on the Society of Indian Law Firms (SILF).
• Chairman of the FICCI Committee on Stressed Assets and a member of the
Capital Markets Committee.
Rudra Kumar Pandey, Partner

T +91 114 985 9932
F +91 112 692 4900
E rudra.pandey@amsshardul.com

Network)
Professional qualifications. B. Com (Hons); CS, ICSI; LLB, Delhi University
Areas of practice/experience.More than 16 years of experience in

corporate commercial transactions, general corporate advisory and advising on
corporate governance matters; areas of expertise include corporate structuring,
mergers & acquisitions, takeovers, delisting's, private equity investments, joint
ventures, real estate, banking and finance, project finance, establishment and
management of funds (onshore and offshore).
Recent transactions
• Advised Mitsui Fudosan Co, Japan (through its investing entity, Mitsui
Fudosan (Asia) Pte, Singapore), on the acquisition of a 50% equity stake
in Akarshak Infrastructure Private (which will be developing a commercial
real estate project in Bengaluru, Karnataka).
• Advised Kubota Corporation, Japan, in relation to entering into a joint
venture with Escorts Limited to manufacture tractors in India.
• Advised Kubota Corporation Japan on its acquisition of a minority stake in
Escorts.
• Advised Hakuhodo Japan (through its investing entity, Hakuhodo
Investment Singapore Pte Singapore) on its acquisition of an equity stake

of more than 75% (directly plus indirectly) in Adglobal360 India Private,

India, through acquisition of equity shares of Adglobal360 Singapore Pte,
Singapore (which is the holding company of Adglobal India), from its
existing shareholders and acquisition of equity shares of Adglobal, India,
from its other existing shareholders.
Languages. English, Hindi
Professional associations/memberships
• Bar Council of Delhi; Institute of Company Secretaries of India.

• Involved with the Ministry of Commerce and Industry, GoI in discussing
and actively taking up trade issues under the Comprehensive Economic
Partnership Agreement (CEPA) and other bilateral arrangements with
Asian countries including Japan.
• Interacted with the committee constituted on ease of doing business
in India and to review the existing regime on labour laws, licenses and
approvals and related law reforms, by the DPIIT, under chairmanship of
Mr Ajay Shankar.
• Member of the Legal Services Committee of National Council and the
Corporate and Tax Committee of Northern Regional Council of the
Confederation of Indian Industry (CII).
• Member of part of CII's committee on Ease of Doing business in India.
• Part of working group constituted by DPIIT, in relation to new Industrial
Policy (2017) of the Government of India.
• Worked with Sub-committee on Improvement of Business Environment
under India-Japan CEPA representing Indian industries and also
understanding issues raised by Ministry of Economy, Trade and Industry
(METI), Japan.
• Japan Chamber of Commerce and Industry in India (JCCII) and
KEIDANREN.
• Worked with the Expert Committee constituted by the MCA on the cost
audit scenario in India.
• Part of the working group in the Injeti Srinivas Committee constituted for
decriminalisation of offences under the Companies Act 2013.
Vishal Nijhawan, Senior Associate

T +91 114 159 0700

F +91 112 692 4900
E vishal.nijhawan@amsshardul.com

Network)
Professional qualifications. LLB, University of Delhi
Areas of practice. More than six years of experience in the field of M&A,
banking and finance, joint ventures, other general corporate advisory and public
policy and regulatory affairs matters.
Recent transactions
• Advised Mitsui Fudosan Co, Japan (through its investing entity, Mitsui
Fudosan (Asia) Pte, Singapore), on the acquisition of a 50% equity stake
in Akarshak Infrastructure Private (which will be developing a commercial
real estate project in Bengaluru, Karnataka).
• Advised the Kubota Corporation in relation to entering into a joint venture
with Escorts to manufacture tractors in India.
• Advised Hakuhodo, Japan (through its investing entity, Hakuhodo
Investment Singapore Pte, Singapore), on the acquisition of an equity
stake of more than 75% (directly plus indirectly) in Adglobal360 India
Private India, through acquisition of equity shares of Adglobal360
Singapore Pte, Singapore (which is the holding company of Adglobal,
India), from its existing shareholders and acquisition of equity shares of
Adglobal India from its other existing shareholders.
Languages. English, Hindi
Professional associations/memberships. Bar Council of Delhi.
• Part of the working group in various committees constituted by the MCA to

amend the Companies Act 2013:
• expert committee on the Companies (Cost Records and Audit) Rules
2014;
• Company Law Committee (2018) to review offences under the 2013
Act; and
• Company Law Committee (2019) to review offences under the 2013
Act.

• Assisted FICCI in providing inputs to the Ajay Shankar Committee for its
report on ease of doing business in India.
END OF
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Investing in India

Practical Law Country Q&A 7-596-0585

© 2020 Thomson Reuters. All rights reserved.

Country Q&A | Law stated as at 01-Jul-2020 | India

A Q&A guide to investing in India.

© 2020 Thomson Reuters. All rights reserved. 1

1. How does your jurisdiction compare internationally as a destination for

2. What types of companies are attracting foreign investment into your

India receives substantial foreign investment in various sectors and companies.

© 2020 Thomson Reuters. All rights reserved. 2

The services sector (which includes financial, banking, insurance, non-financial or

Foreign investment of up to 100% is permitted in business-to-business (B2B) e-commerce

India requires an investment of about INR50 trillion (USD777.73 billion) in the

© 2020 Thomson Reuters. All rights reserved. 3

• Tax reductions on electric vehicles.

© 2020 Thomson Reuters. All rights reserved. 4

• Providing a six-month moratorium on all term loans outstanding on 1 March 2020

World Bank Doing Business ranking

Implementation of the Insolvency and Bankruptcy Code 2016

© 2020 Thomson Reuters. All rights reserved. 5

Liberalisation of FDI Policy

• Relaxation of local sourcing requirements for single brand retail

• Foreign investment in digital media. Foreign investment of up to 26% under

© 2020 Thomson Reuters. All rights reserved. 6

a legally tenable contract, whether on a principal to principal or principal to agent

4. What are the constitutional arrangements and legal system.

© 2020 Thomson Reuters. All rights reserved. 7

The Constitution is the supreme legal document of the country.

The judicial structure is as follows:

Furthermore, a number of judicial tribunals have been set up in specialised areas,

Key laws governing foreign investment

© 2020 Thomson Reuters. All rights reserved. 8

• FDI Policy, issued by the DPIIT.

The NDI Rules govern investments in India by non-residents investors, non-resident

• The conditions attached to foreign investments in India.

Key regulatory authorities governing foreign investment

6. Is your jurisdiction a member of any international treaty organisations and/

© 2020 Thomson Reuters. All rights reserved. 9

• India-World Trade Organization (WTO). India is party to multiple

© 2020 Thomson Reuters. All rights reserved. 10

In addition, India has FTAs, comprehensive economic co-operation agreements and

7. What other international agreements apply to foreign investment?

© 2020 Thomson Reuters. All rights reserved. 11

• India-Brazil Investment Corporation Facilitation Treaty (signed January 2020).

Based on information available in the public domain, we understand that India is

© 2020 Thomson Reuters. All rights reserved. 12

• Establish an industrial or business venture, or explore the possibilities for

Overseas Citizen of India (OCI) cardholder. Indian law recognises a distinct

© 2020 Thomson Reuters. All rights reserved. 13

• He or she was a citizen of India on or at any time after 26 January 1950.

Permanent Account Number (PAN) for foreign residents

© 2020 Thomson Reuters. All rights reserved. 14

© 2020 Thomson Reuters. All rights reserved. 15

• Automatic route. Under this route, foreign investment is allowed without

© 2020 Thomson Reuters. All rights reserved. 16

investment is also subject to security clearance and guidelines of the Ministry

Foreign investment in India is prohibited for the following sectors or activities:

• Lottery businesses, including government or private lotteries and online lotteries.

© 2020 Thomson Reuters. All rights reserved. 17

13. Are there restrictions on foreign ownership or occupation of real estate?

© 2020 Thomson Reuters. All rights reserved. 18

• A foreign embassy or diplomat or consulate general can purchase or sell immovable

In relation to entities engaged in multi-brand retail trading activities, a minimum of